CryptocurrencyWallet –A to ZWhat is cryptocurrency wallet?If one wants to use any cryptocurrency,they will need to have a wallet. Originally perceived as a collection ofsecured digital codes1, a cryptocurrencywallet is a software program that stores private and public keys and interactswith various blockchain toenable users to send and receive digital currency and keep an eye on theirbalance. Earlier, the wallets were meant tojust store cryptocurrency but they have eventually evolved as a refined mediumto carry out various transactions and provide numerous additional services.A survey in 2017 estimated the number of currently activewallets to be between 5.8 million and 11.
5 million.52% of the surveyed wallets werefound to provide facilities of exchanging currencies and 80% of those 52%provide national to cryptocurrency exchange service. 85% of all wallets providing currency exchangeservices enable the purchase and sale of national currencies, 15% provide onlycryptocurrency-to-cryptocurrency exchange services, and 23% provide both national-to-cryptocurrencyas well as cryptocurrency-to-cryptocurrency exchange services. 2 It isinteresting to note that 76 percent of incorporated3 wallet providers donot have a license.4How does it work?When a digital currency issent, the sender is letting go of the ownership of the coins to receiverwallet’s address. To be able to spend those coins and unlock the funds, theprivate key, which is a secure digital code known to you and your wallet, mustmatch the public address, a public digital code connected to certain amount of currency.If public and private keys match, the balance in receiver’s wallet willincrease, and that of the senders will decrease.
Unlike a customary realexchange of coins, the transaction is signified only by a transaction record onthe blockchain and the wallet acts as a personal ledger oftransactions. For certain type of transactions,a processing fee needs to be paid for certain types of transactions to networkminers as a processing fee. You can set your own fee. A lower fee transactionmay get lower priority, and the transaction may take long time to getconfirmed. 5TypesAccordingto their form, wallets can be categorised into three groups – software, hardwareand paper.Software6:· Desktop: These wallets are downloaded on a PC or laptop. They are only accessiblefrom the single computer in which they are downloaded. It offers considerablyhigh security but runs the risk of being affected by viruses or hackers.
· Online: Thesewallets run on the cloud and are accessible from any computing device in anylocation. While they are more handy to access, online wallets store yourprivate keys online and are controlled by a third party who makes them morevulnerable to hacking attacks and theft. · Mobile: These wallets run on anapp on phone and are useful because they can be used anywhere . Mobile walletsare usually much smaller and simpler than desktop wallets because of thelimited space available on a mobile. Several attempts are being made toincrease the reach of user information and trace back the real identity of theuser particularly if the wallet was downloaded in a smartphone7Hardware: They store auser’s private keys on a hardware device like a USB. Although hardware walletsmake transactions online, they are stored offline which delivers increasedsecurity. Hardware wallets can be compatible with several web interfaces andcan support different currencies.
Users simply plug in their device to anyinternet-enabled computer or device, enter a pin, send currency and confirm. Hardwarewallets make transactions easy while also keeping your money offline and awayfrom danger. Recent study nevertheless shows the possibility of these types ofwallets being equally vulnerable to hackers.8Paper: wallets are easy to use andhighly secure. It is basically either a physical copy or printout of yourpublic and private keys, or a piece of software that securely generates a pairof keys which are then printed.
Transferringcurrency to a paper wallet is achieved by the transfer of funds from softwarewallet to the public address shown on the paper wallet. The process of transferring money fromsoftware wallet to paper wallet is called ‘sweeping,’ can either be done manuallyby entering your private keys or by scanning the QR code on the paper wallet.Sweeping is done for purpose of spending or withdrawing the currency.Therecan be a multicurrency or single currency wallet.Walletscan be hot or cold. A hot wallet is one which is connected to internet. It isideal for everyday purchasing and thus user can keep small amounts of its coinsin it. However it runs the risk of being hacked due to the malice of the internet.
Cold wallets store your coins offline and can be plugged in to a computerwhenever needed.9Storing of coins offline ispopularly called “cold storage”Popular Bitcoinwallets:Bread Wallet: Bread is a mobile bitcoin wallet that is easy to use and can bedownloaded from the App Store or Google Play. It offers a detached client, sothere is no server to use when sending or receiving bitcoins. Users can access their money and are in fullcontrol of their funds at all times.
Itsclean interface, lightweight design andhigh focus on security, makes the application safe, fast and useful for bothbeginners and experienced users alike.Mycelium: The Mycelium mobile wallet allows iPhone and Android users to send andreceive bitcoins and keep complete control over bitcoins. With securitysuperior to most other apps and features like cold storage and encrypted PDFbackups, an integrated QR-code scanner, a local trading marketplace and secure chat,Mycelium provides a host of features and qualifies as one of the best walletson the market specifically for advanced users.The above walletshowever lack web or desktop interface and are hot wallets.Copay: Created byBitpay, Copay is oneof the best digital wallets on the market.
Copay is easily accessed through auser-friendly interface on desktop, mobile or online. It’s a multi-signaturewallet so friends or business partners can share funds. It is useful for both beginnersand advanced users alike. However it can be slow and unresponsive with limiteduser support.Jaxx: Jaxx is amulti-currency supporting Ether, EtherClassic, Dash, DAO, Litecoin, REP, Zcash, Rootstock, Bitcoin wallet and userinterface.
It is available on a variety of platforms and devices (Windows,Linux, Chrome, Firefox, OSX, Android mobile & tablet, iOS mobile &tablet) and connects with websites through Firefox and Chrome extensions. Jaxxallows in wallet conversion between Bitcoin, Ether and DAO tokens viaShapeshift and the import of Ethereum paper wallets. It is claimed to be anexcellent wallet given its features but the code is not open source and can beslow to loadArmory:Armory isan open source Bitcoin desktop wallet suitable for experienced users and highly secure.
Armory’s features include coldstorage, multi-signature transactions, one-time printable backups, multiplewallets interface, GPU-resistant wallet encryption, key importing, key sweepingand more. Although Armory takes a little while to understand, thus not suitablefor beginners.Trezor:Trezor is a hardware Bitcoin wallet with a large storing capacity.Trezor cannot be infected by malware and never exposes your private keys whichmake it as safe. Trezor is open source and transparent, with all technicaldecisions benefiting from wider community consultation. It’s easy to use, hasan intuitive interface and is Windows, OS X and Linux friendly. One of the fewdownsides of the Trezor wallet is that it must be with you to send bitcoins.This, therefore, makes Trezor best for inactive savers, investors or people whowant to keep large amounts of Bitcoin highly secure.
Ledger Nano: It is a new hierarchical deterministic multicurrency hardware walletfor bitcoin users with a second security layer. It is a compact USB devicebased on a smart card. It is roughly the size of a small flash drive,measuring 39 x 13 x 4mm (1.53 x 0.51 x 0.16in) and weighing inat just 5.
9g.The process of recovering wallet from the seed can be donewithout connecting the device to the computer.Besides,its quiet inexpensiveGreen Address: It is a user-friendly Bitcoin wallet. Green Address is accessible viadesktop, online or mobile with apps available for Chrome, iOS, and Android.Features include multi-signature addresses & two-factor authentications forenhanced security, paper wallet backup and instant transaction confirmation. Adownside is that Green Address is required to approve all payments, so you donot have full control over your spending.Blockchain (dot) info: Blockchain isone of the most popular Bitcoin wallets.
It can be accessed from any browser orsmartphone. For the browser version, users can enable two-factorauthentication, while mobile users can activate a pin code requirement everytime the wallet application is opened. Although your wallet will be storedonline and all transactions will need to go through the company’s servers,Blockchain.info does not have access to your private keys. This is awell-established company that is trusted throughout the Bitcoin community .Itis but a hot wallet and has a weak privacy feature.
Benefits andchallengesBitcoinpromotes individual ownership of money, independent of any central authority.10 Its popularity increasing to such extent that it is expectedto have applications in enhancing healthcare systems11 and building smart cities.12Thusthere is no ruling of any third party in the matter of cryptocurrency. There areno taxes to be paid and the transaction fees become really economical.Theanonymity provided is far greater than the usual bank accounts. The requirementof the privacy being exploited only comes in case of crime or error.There isa certain degree of resistance to theft if the wallets are used righteously.Online wallets can expose users to possible vulnerabilities to hackers butoffline wallets cannot be hacked as they aren’t connected to an online networkand don’t rely on a third party for security.
73% of surveyed wallets do not take custody ofuser funds but let the user control private keys; providing full control tousers.Irrespectiveof the type of wallet being used, losing private keys will lead to lose money.There is no way to regain lost currency or reverse the transaction in case ofany problem. It’s advisable tobackup the wallet and private keys and to encrypt them. At least one backupshould be on a CD or thumb drive.
If the wallet or keys are lost, the currencyconnected to it is lost too. The real identity of user is not tied to itsaccount in a cryptocurrency wallet. He/she may use a pseudonym for representation.However in case of a crime the identity can be traced back by authorities.13 i 1 8.
S. Eskandari, D. Barrera, E. Stobert, and J. Clark. A first look at theusability of bitcoin key management. In Workshop on Usable Security (USEC),2015.2 https://www.
uk/fileadmin/user_upload/research/centres/alternative-finance/downloads/2017-global-cryptocurrency-benchmarking-study:Cambridge Centre of Alternative Finance. 3 Registeredcorporations that provide software and/or hardware wallets.4 https://cointelegraph.com/news/key-findings-from-cambridge-cryptocurrency-study. Author:Darryn Pollock5 https://blockgeeks.com/guides/cryptocurrency-wallet-guide 6 https://cryptflix.com/videos/most-popular-crypto-youtubers/top-5-best-cryptocurrency-wallets-ameer-rosic/ 7 http://www.
marshall.edu/forensics/files/Montanez-Angelica_Final-Research-Paper.pdf 8 https://www.slashgear.com/bitcoin-hardware-wallet-vulnerability-exposes-funds-to-hackers-study-23516801/ 9 https://medium.com/dash-for-newbies/cold-wallet-vs-hot-wallet-whats-the-difference-a00d872aa6b1 10 1S.
Nakamoto, “Bitcoin: A peer-to-peer electronic cash system,” Available: http://bitcoin.org/ bitcoin.pdf , 2008 11 M.Mettler, “Blockchain technology in healthcare: The revolution starts here,” in2016 IEEE 18th International Conference on e-Health Networking, Applicationsand Services (Healthcom), Sept 2016, pp. 1–3 12 K.Biswas and V. Muthukkumarasamy, “Securing smart cities using blockchaintechnology,” in 2016 IEEE 18th International Conference on High PerformanceComputing and Communications (HPCC/Smart City/DSS), Dec 2016, pp.